A slight drop in GDP growth compared with last year is a cause for celebration. The "fastest rate of quarterly growth in five years", enthuses the Telegraph. This is a sign of how our standards have been recalibrated by the recession. The lavish 0.9% bounty of GDP growth was reportedly made possible by the unusually high household spending prompted by the Olympics.

But if that doesn't get your juices flowing, you are not alone. Business investment remains sluggish, as companies are hoarding cash rather than investing. After all, if this growth was facilitated by an extravagant Olympics boondoggle, how can it possibly be sustained?

Even supposedly encouraging employment statistics harbour trouble, as underlying signals show businesses are pulling back from creating jobs and focusing on cost-cutting. Forget the "double-dip recession" – the "triple-dip" is on its way. Simply put, businesses aren't investing, because they have no confidence that any investment will return with a profit. And if capitalists aren't investing, then capitalism isn't working.

The weakness of the British economy is producing a shortfall in government receipts, and causing government borrowing to rise again. In response to this situation, the Institute for Fiscal Studies has argued that the government may be forced to extend austerity, adding another £11bn in cuts and stringing it out until 2018.

From one perspective, this is institutionalised madness. There is an obvious relationship between spending cuts, economic stagnation and the resulting drop in government revenues. To insist on not just staying the course, but actually protracting cuts at this point, seems deeply misguided.

Things look worse when you consider that most of the worst of austerity has yet to come. For example, total public sector employment is not far below what it was in 2007-8, the decline far off the 710,000 job cuts intended by the government. Some benefits cuts have been implemented, but most of the pain will hit next year. The government has staged the implementation of austerity, perhaps hoping that a recovery in the future will camouflage its effects. No such luck. The British economy's prospects look worse now that the global economy is weakening again.

What, then, accounts for George Osborne's unseemly confidence in pushing for more cuts? He had no problem offering the Tory mob another wave of benefits cuts amounting to £10bn by 2016-17 – higher than annual spending in many government departments, and about equal to a year's spending in the Home Office. Granted that the Tories probably have little to fear politically from housing benefit claimants or the disabled, this still looks like an attack on consumption at a time when household spending is too low to sustain growth.

For those advocating a radical Keynesian solution to the crisis, the Tories' insistence on deeper cuts, even as they seem to impede growth, can only be seen as "ideological". And if the Tories' main goal was to reduce the deficit, this would make sense. In fact, things are not as they seem. Austerity will not end in 2015, or in 2018. The Tories have been explicit about this. The cuts will be implemented over a long period, but once implemented they are intended to stay.

This is not a short-term deficit-reduction programme. As in previous crises, such as the prolonged malaise afflicting the British economy until 1982, the government is intent on restoring capitalist dynamism by means of a long-term transfer of wealth away from consumption and towards investment. Bank of England governor Mervyn King has been consistently clear about this: the economy must be rebalanced "away from private and public consumption towards exports and import substitution in the longer run".

In this respect, the attempt to systematically reduce the cost of the state on the productive base of the economy, is part of a wider strategy of transferring money to businesses in the hope that it will give them more room to invest. This is bound up with an export-driven growth agenda, as the UK seeks to export more to China and other economies. This growth formula resembles that hit upon by Germany in the EU, as it was able to suppress domestic wages and public spending while exports to the periphery made up for lost demand. And from the point of view of businesses, this looks like a far more plausible solution than those calling for socialising investment, redistributing wealth or a rebooted corporatism – all of which would cost them wealth and power, and none of which guarantee them results any more than austerity does.

Once this is understood, it becomes clearer why the reflex solution of the British elite is to respond to crises with yet more austerity. It may be true that Osborne and King have consistently over-rated Britain's chances of economic recovery. And they certainly seem indifferent to the social misery entailed by their solution. But they aren't stupid. Their speeches show that they understand the risks of too much austerity, too soon. It's just that when all the options are bad, they would much prefer to go with the orthodoxy that has served business well in the past.